Big fight looms over how to fix NM’s lottery scholarship program

By Rob Nikolewski │ New Mexico Watchdog

SANTA FE, N.M. – Virtually every member of the Roundhouse thinks something needs to be done to fix the New Mexico Lottery Scholarship program.

But how to do it — and whether taxpayer dollars should be used to shore up the program — may lead to some big fights in the upcoming 30-day legislative session.

The scholarship program was created in 1995, but in recent years more money is going out than coming in, largely because sales of lottery tickets — such as Scratchers and Powerball — have been flat while the tuition rates at colleges and universities in the state have spiked.

This year it’s estimated $40 million dollars will come into the program, but $67 million will go out in the form of scholarships, which about a quarter of New Mexico’s full-time undergraduates receive.

“Something needs to be done,” Tom Clifford, secretary of the Department of Finance and Administration, said to the House Appropriations and Finance Committee on Monday.

The scholarship program shortfall will be one of the chief topics when the Legislature convenes Jan. 21. Whether to use taxpayer dollars — from the state’s general fund — as part of a long-term solution is a big question.

“I’m not in favor of that,” said Rep. Jim White, R-Albuquerque. “I don’t think that’s a function of government, to pay for college educations. We already pay the universities in the state to the tune of $900 million. Fourteen-percent of our overall general fund budget goes to the higher (education) institutions.”

But Rep. Henry “Kiki” Saavedra, D-Albuquerque, who chairs the appropriations committee, is open to using general fund money as part of a long-term solution.

“They’re not going to make it (financially),” Saavedra said. “So what we’re going to have to do is bite the bullet and put some general fund money in there … We have to do something because, look at who (the scholarship program) helps.”

The program has always been self-sustaining and has never used taxpayer dollars.

But in budget proposals for the upcoming fiscal year, the Legislative Finance Committee and the administration of Gov. Susana Martinez call for temporarily using general fund money to keep the program going as constructed.

The LFC is calling for an immediate injection of $11 million and another $11 million in the coming fiscal year. The governor’s budget calls for $16 million, and Martinez insists it’s just a one-time appropriation and she is against using taxpayer money in the long-term.

“We do not want children who are in college to feel the pain because this fund is not solvent,” Martinez said earlier this month. “We also think (the lottery scholarship) can work within the parameters laid out by the Legislature when they created this fund.”

“I’m skeptical about ‘one time,’ ” said Rep. Paul Bandy, R-Aztec. “Unless you do something, it’s pretty hard to stop.”

Rep. Sharon Clahchischilliage, R-Kirtland, agreed. “The graduation rates haven’t increased” since the lottery scholarships were instituted she said. “No, I wouldn’t want (general fund dollars used as a long-term solution) simply because taxes should be used differently.”

“What I suggest is we de-couple (the lottery scholarship) from tuition fees so that (recipients) get a certain amount of money,” Bandy said. “If there’s a difference, the college can pick it up or they can charge the student.”

Among other suggestions being floated?

*Raising the minimum grade point average from 2.5 to 2.75, although some critics say that would put pressure on college professors to inflate grades so that students on the borderline don’t lose their scholarships

*Increasing the number of credit hours a lottery scholarship student must take from 12 hours per semester to 15

*Capping the dollar amount awarded to each scholarship recipient

*Reducing the length of the scholarships from eight semesters to seven

*Help shore up the program by using revenue from the gaming contracts between the state and Native American tribes, although that would require a good deal of political coordination

*Boost the program’s finances by using money from other state funds, but that would surely lead to push-back from defenders of the programs that would be targeted

*Make the scholarships a means-tested program, so that students from wealthier homes would be left out

“If folks are making a lot of money there’s no reason they need that lottery scholarship (for their kids),” said Sen. Tim Keller, D-Albuquerque.

But Paul Gessing, president of the Rio Grande Foundation, a free-market think tank based in Albuquerque, said a number of scholarship programs for low-income students are in place.

“Unfortunately,” Gessing said in a paper released last week, “low-income students who receive the Lottery Scholarship drop out of the program at twice the rate of other students. Lottery Scholarship dropouts represent a significant loss of limited scholarship resources.”

Among his recommendations, Gessing calls for a “limited tuition voucher” that would allow students to go to any college or university — even ones outside of New Mexico — believing it would provide incentives for students to go to schools that are the best fit for them while encouraging price-shopping.

But Gessing admits that “given political limitations in New Mexico and inertia,” scholarship vouchers “may not be a realistic option.”

Keller said the lottery should be self-sustaining. But, “If we need to supplement it slightly from things like gaming and even some sin taxes like cigarettes and tobacco, I think folks would be willing to do that and that would be okay.”

While White is against using taxpayer dollars as part of a long-term solution, he says he’s open to accepting LFC and Governor’s Office recommendations to use general fund money once, but only once for incoming students in the coming academic year.

“I’m willing to say, ‘Hey guys, we can fix this in other ways, we can’t keep on doing this,’ ” White said. “If you accept that idea and let us start cutting back on the overall reward, yeah, I would be amenable to compromise to save the juniors and seniors.”

Contact Rob Nikolewski at rnikolewski@watchdog.org and follow him on Twitter @robnikolewski

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